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Equity CEFs: How To Play Sector Rotations By Investing In CEFs
- What started as a rotation in 2015 has become more of the same over the last couple weeks as leading sectors such as technology and healthcare have reasserted themselves.
- But beneath the surface, there are tell tale signs of a rotation going on, particularly in interest rate sensitive sectors such as utilities and REITs.
- Equity CEFs are a great way to play a rotation because opportunities can arise regardless of which sectors are doing well and which sectors are falling out of favor.
Equity CEFs: Will 2015 Be The Year Of The Rotation? Part II
- Recently, I wrote an article offering what equity based CEFs might benefit from a sector rotation from the leaders over the last few years to some of the laggards.
- Though there have been fits and starts so far in January, and certainly 1-month does not make a trend, indications are that a rotation could very well be afoot.
- The bigger risk is that the end of Quantitative Easing will see a contraction in all asset prices across all sectors.
Equity CEFs: Global CEFs For A QE Europe
- After years of lagging the US markets, will Quantitative Easing by the European Central Bank inflate the European stock markets much like the Federal Reserve did for US markets?
- That seems to be the central question as the ECB begins its own QE bond buying program designed to help stimulate the Eurozone economies.
- And if the ECB is successful, then what global equity CEFs might benefit as well?
Equity CEFs: The Dilemma Of The Equity Option Income Strategy
- Option-income CEFs utilize one of the most popular strategies for income investors who want a stock based fund with a tax-advantaged enhanced yield.
- The downside of option-income CEFs is that they generally will underperform in a bull market due to their defensive strategy of selling future stock appreciation potential for current income.
- But in a market that has been in an uptrend for three years now, should more option-income CEFs use a more bullish strategy or is it time to stay defensive?
Equity CEFs: Will 2015 Be The Year Of The Rotation?
- The bull market in US equities over the past 3-years has certainly been a boon to most equity CEFs though it all depended on what funds you were in.
- Equity CEFs that focused in healthcare, biotech or technology have been the greatest beneficiaries while commodity funds in energy, gold and metals have lagged the most.
- But could 2015 shape up to be a rotational year? If a more aggressive Federal Reserve and a reasonably strong global economy are at hand, than maybe so.
Equity CEFs: The Long-Term Beneficiary Of The Nuveen Equity Option Restructurings
- After a two-month delay due primarily to shareholder apathy, we may find out this afternoon if shareholders have finally given approval to the Nuveen equity option restructuring proposals.
- If the restructurings are approved, there will be a primary winner in the short run, but more importantly, an unlikely beneficiary in the long run, according to my research.
- The restructurings are an effort by Nuveen to simplify and enhance their equity option funds strategies which are geared to the S&P 500, Nasdaq-100 and Dow Jones Industrial Average indices.
Equity CEFs: Funds To Buy And Sell Heading Into 2015 - Part II
- It's time to turn the tables and look at what CEFs investors might want to swap out of in favor of my buy rated picks from my Part I article.
- Sell rated CEFs are overvalued and overpaying their high distributions and if they haven't been able to cover their distributions since 2012, then their distributions are vulnerable.
- Investors may also want to be looking at tax-loss candidates so I'll be looking at the worst YTD market price performers as well.
Equity CEFs: Funds To Buy And Sell Heading Into 2015
- As we head into the final months of 2014 and into 2015, the markets tend to perform their best during this period.
- After the much anticipated correction everyone was looking for just a couple weeks ago, many equity CEFs are still left at depressed market prices and valuations.
- This article will review which equity CEFs may outperform in the months ahead while in a later article, I will look at some overvalued and tax-loss fund candidates.
Equity CEFs: The Nuveen Equity Option CEF Restructuring/Mergers Delayed Again
- On May 1st, 2014, Nuveen announced the restructuring and mergers of 7 of its equity option-income CEFs that would bring the total number of funds down to 4.
- The initial shareholder meetings to approve or disapprove the restructurings/mergers was held on September 19, 2014, but has since been adjourned twice now to November 17th.
- Concern that the mergers may now not go forward has caused one of the proposals to result in wide arbitrage valuation swings for two of the merging funds.
Equity CEFs: A September To Forget
- The PIMCO CEFs were just the latest family of funds to get knocked down in September and beneath the surface, there's a lot of turmoil going on right now.
- CEFs, like bonds, can be a canary in the coal mine before something more substantial hits the broader markets and right now, the canary is wobbling.
- At the same time, the end of Quantitative Easing may be turning the liquidity tide out, but that doesn't mean there are still not good investments in CEFs.
CEF Strategies: The PIMCO CEFs - Opportunity Or Warning Shot?
- It took only one piece of news regarding one individual to throw turmoil into to an asset class that usually doesn't get much attention from the media.
- Because, you see, you won't find a lot of logic in CEF price movements over one day or even a month sometimes.
- But follow these funds for years, like I do, and they begin to make a lot of sense and in fact, become the most predictable asset class I know.
Equity CEFs: Funds With Strong NAVs And Weak Market Prices
- Opportunities in equity CEFs come about when investors throw in the towel on funds that are otherwise performing very well at the NAV level and may be even raising distributions.
- Funds which continue to see weakness and widening discounts appear to be among new issues or funds focused in such sectors as MLPs, REITs or commodities.
- If we are at an inflection point in the markets, hedges which are correlated to these weak CEFs can protect the downside while investors continue to receive their high distributions.
Equity CEFs: Don't Judge A CEF By Its Yield
- Yield is the most common factor that investors use to buy CEFs. The higher a fund's yield, the more popular the fund and typically the higher the valuation.
- Though CEFs generally offer some the highest average yields of any asset class in the financial markets, income investors can easily fall into a yield trap.
- And if interest rates eventually rise, investors should be placing even less emphasis on CEF yields and more emphasis on a fund's yield stability and NAV growth.
CEFs: An Opportunity In A Nuveen Floating Rate Fund
- When the markets become unsettled, valuations in CEFs can spike to head scratching comparisons, often for no other reason than a single institution accumulating or liquidating.
- One sector that has seen a wide variance of performances and valuations has been among the floating rate or senior loan CEFs.
- Floating-rate CEFs have generally lagged in performance compared to most fixed-income securities since they rely both on a strong economy and a rising interest rate environment.
- With talk now of interest rates possibly rising sooner than later, are there any opportunities among floating-rate funds to get involved before an upswing occurs?
Equity CEFs: New Kids On The Block
- New issue Closed-End funds (CEFs) can be expensive depending on how they come to market. CEF IPOs typically start at a premium whereas spin-offs can start at Net Asset Value.
- Two new issue CEFs have recently come to market, one in the popular energy MLP space and one in the not-so-popular small & mid cap value space.
- Though no one can be sure which sectors which will outperform going forward, just based on CEF premium and discount valuations, we can come to some investment conclusions.
Equity CEFs: The Rights Way To Play CEFs
- With the equity markets at all-time highs, its a lot harder to find opportunities in stocks and funds, and sometimes you have to consider other avenues of investing.
- Because many investors are confused about Rights offerings, this can be an area of opportunity often overlooked by investors.
- Combine Rights offerings with Closed-End funds (CEFs), and now you've got a double dose of confusion, giving even more opportunities for investors who do their homework.
Equity CEFs: Funds Benefiting From The Weakness In Technology And Small Cap Sectors
- The high flying technology and small cap sectors are having a more difficult 2014 compared to the rest of the market, with both indices down on the year.
- Should this trend continue, there are equity CEFs that emphasize value/dividend stocks but are short options in these high beta sectors to augment the income for their high yields.
- Should these CEFs long portfolio positions continue to outperform their technology and smaller cap sector counterparts, these fund's NAVs stand to outperform as well.
Equity CEFs: 1st Quarter 2014 Review - A Change In Leadership
- Lagging CEFs over the last couple years have stepped up to the forefront so far in 2014 while leaders from 2012 and 2013 have started to fade.
- Though its early to say if this trend will continue, several CEFs still offer excellent entry points as their market prices have yet to catch up to their outperforming NAVs.
- In contrast, some popular CEFs are looking more vulnerable as their NAVs begin to struggle.
Equity CEFs: A Fund Which Probably Should Just Go Open-End
- CEFs use leverage, options and other income strategies to offer much higher yields than what most mutual funds and ETFs can offer.
- CEFs which don't offer a superior yield tend to trade at wide discounts because they then compete with other yield-oriented securities.
- If a fund doesn't utilize the income advantages of a CEF structure, then fund sponsors should consider going open-end and unlocking the fund's assets.
- Equity CEFs: Sell This, Buy That From These Fund Families
- CEF Strategies: Forget 1929, Why 2014 Is More Like 2000
- Equity CEFs: Utility CEFs Are Back
- Equity CEFs: Will ETFs Beat CEFs Again In 2014?
- Equity CEFs: Which Funds To Buy And Sell Right Now - Part IV
- CEF Strategies: The Sad State Of Municipal Bond CEFs
- Equity CEFs: Which Funds To Buy And Sell Right Now - Part III
- Equity CEFs: Which Funds To Buy And Sell Right Now - Part II
- Equity CEFs: Which Funds To Buy And Sell Right Now - Part I
- Equity CEFs: THE Most Undervalued Equity CEF
- Equity CEFs: How To Play The Allianz Funds Right Now
- Equity CEFs: Terrific Opportunity In A Duff & Phelps Utility Fund
- Equity CEFs: From Birth To Liquidation - The Story Of The Allianz International & Premium Strategy Fund